“Between January and August, product tanker newbuilding contracting dropped 86% y/y to 2.6 million deadweight tonnes (DWT) representing a nine-year low,” says Filipe Gouveia, Shipping Analysis Manager at BIMCO.
The development marks a stark reversal from the boom seen in 2023 and 2024. During those years, ships in the LR2 and MR segments dominated the order book. A pick-up in contracting for LR1s was also notable since this segment’s fleet has been shrinking so far this decade. This caused the order book to peak in November 2024 at 42.2 million DWT, the highest since 2008.
Since the start of 2025, the product tanker order book has shrunk by 12%. Currently, LR2 ships account for 48% of the DWT capacity on order, followed by 37% for MRs and 13% for LR1s, the remaining being in the handysize segment. Contracting decreased across all segments and although MRs fared the best, they still fell 76% y/y.
“Despite the slowdown in contracting, the order book remains large at 37.2 million DWT, equivalent to 19.2% of the product tanker fleet. This will lead to an increase in deliveries over the next two years which could pressure freight rates further and encourage recycling of older ships,” says Gouveia.
The high number of newbuilt ship deliveries will assist fleet renewal in the product tanker fleet. It has been gradually aging since 2011, and the average tanker is now 14 years old.
Low recycling activity in recent years has contributed to the aging of the fleet and by now, 20% of the product tanker fleet’s capacity is provided by ships 20-years-old or older. Relative to historical recycling patterns, we estimate that the current recycling overhand could be as high as 10% of the trading fleet. Significant potential to manage future fleet growth through recycling therefore exists.
Out of the current orderbook, 11% of the contracted capacity will be capable of using alternative fuels upon delivery, while an additional 22% will be ready for future retrofitting. Out of the capable ships, 90% will be equipped to use LNG while the rest will be able to use methanol.
“Product tanker contracting could remain low in the near term amid the large orderbook and a weak long term demand outlook. According to the International Energy Agency, demand for global refined products could grow marginally in the short term and peak in 2027. A continued shift towards electric vehicles is expected to negatively impact gasoline and diesel demand at a rate that exceeds the growth in demand for naphtha and jet fuel,” says Gouveia.
Source: BIMCO